Circuit City earnings come down Electronics chain cites competition

Net income slumped for Circuit City Stores Inc. during the retail chain's fourth quarter, but a securities analyst in Baltimore blames forces beyond the company's control.

"Circuit City's management is doing a good job. The company is mainly just suffering with the market," said Michael Mead, a regional analyst with Legg Mason Wood Walker in Baltimore.

Mr. Mead cited the recession -- which has restrained consumer spending -- as a major factor affecting Circuit City's earnings during the second half of 1990. Earnings were down 18.6 percent in the fourth quarter, compared with a year earlier.

"Many of the things that Circuit City sells are postponable purchases," Mr. Mead pointed out. Given economic uncertainty, many consumers are waiting to make discretionary purchases of the sort of home electronics items that Richmond, Va.-based Circuit City sells, he said.

Both Mr. Mead and Ann Collier, a Circuit City spokeswoman, cited intensified competition in the Los Angeles market as a factor that hurt Circuit City's profitability in recent months.

During the last two quarters, two formidable competitors moved into the Los Angeles market where Circuit City has traditionally been strong and now operates 26 of its 171 stores, Ms. Collier said. The rivals are the Good Guys chain, based in San Francisco, and Silo, based in Philadelphia.

"These are two good operations giving them lots of competition in Los Angeles," Mr. Mead said.

Although Mr. Mead praised Circuit City's management, he says the company faces an overall problem that has affected all the players in the consumer electronics industry: the lack of a new product to drive consumers into the marketplace.

By now, Mr. Mead said, most households have a VCR and a microwave oven.

Furthermore, Mr. Mead said that there is no other major new product in sight for stores such as Circuit City -- although he contends that high-resolution television offers hope for the industry later in the 1990's.